Payroll Audits: How to Prepare with Confidence

The Realities Behind Production Payroll Audits

Payroll audits are a routine part of production accounting and can be triggered for a variety of reasons. Tax incentive filings, studio compliance reviews, union and benefits audits, or even internal spot checks are among the most common. In some cases, audits may also arise from grievances, payment discrepancies, or simple data verification requests.

No matter the reason, every audit requires the same foundation: accurate records, clear documentation, and traceable approvals. Productions that maintain organized, verifiable data throughout the payroll process are better positioned to respond with confidence and minimize disruption when an audit occurs.

Why Payroll Audits Are So Challenging

Audit prep can take anywhere from a single day on a small project to several weeks for large studio productions. The biggest challenge isn’t the audit itself; it’s the manual work that comes before it.

Paper files, unorganized folders, and missing documents slow everything down. Inconsistent filing practices and scattered records create unnecessary delays. When productions use multiple vendors, the complexity multiplies, since every company formats data differently and reconciliation becomes time-consuming.

Payroll audits also require sharing files that contain sensitive personal information, including Social Security numbers, bank details, and addresses. When those documents live in inboxes or unsecured drives, productions open themselves up to unnecessary risk. Protecting PII isn’t just about compliance; it’s about protecting your team and maintaining trust across the production.

A secure, centralized environment ensures that sensitive payroll data stays protected throughout the audit process and can be accessed safely when needed.

What Auditors Look For

Auditors typically focus on completeness and clarity. The most common issues involve missing or incomplete paperwork such as unsigned timecards, missing onboarding forms, unclear approvals, or handwriting that obscures who authorized what.

For tax incentive audits, the scrutiny goes even deeper. Auditors often review start paperwork to confirm state residency and eligibility for tax credits, and these reviews typically take place within a year of the production’s completion.

Having verified voucher and timecard data, a clear edit history, and documented approvals makes it far easier to respond quickly and confidently.

Preparing with Confidence: A Practical Framework

Experience from the field points to four principles that help productions stay audit-ready year-round:

1. Centralize and Secure Data
Keep all payroll, voucher, and onboarding records in one secure system. Avoid sharing sensitive information through email or unsecured file transfers. A centralized, encrypted platform ensures that only authorized people have access to audit materials when needed.

2. Verify Continuously
Perform checks and balances during payroll processing rather than waiting until an audit request arrives. Early verification prevents errors from compounding over time.

3. Maintain Transparency
Document who approved what and when. Every signature, rate adjustment, and note should be traceable, providing a clear trail of accountability.

4. Leverage Oversight
Maintain a clear line of communication with your payroll company or coordinator. Having someone who can provide guidance, troubleshoot issues, or clarify discrepancies ensures nothing gets overlooked during audit preparation.

The Role of Technology and Human Oversight

Technology has transformed how accountants manage audits, but it’s not about replacing people. It’s about empowering them.

Digital systems can instantly generate audit trails that show when approvals happened and by whom. Secure digital records eliminate the risk of lost or incomplete paperwork, and encrypted environments keep sensitive information safe.

Beyond automation and accuracy, modern payroll systems have to prioritize data protection. From secure sign-ins to encrypted storage, keeping PII safe is just as important as keeping it accurate. The right system doesn’t just make payroll faster; it safeguards the information that keeps productions running.

Still, human oversight remains essential. Having a dedicated payroll coordinator or support specialist available to confirm calculations, locate documents, or answer questions gives accountants and studios peace of mind that their data is accurate and complete.

That balance of automation, human expertise, and security builds trust in the data, which is ultimately what auditors and productions need most.

Lessons from the Field

Veteran production accountant Cecilia Escobar has spent more than two decades managing payroll and audits for projects ranging from independent films to major studio franchises. Having supported productions of all sizes, she knows that audit readiness begins long before the first day of shooting.

“I’m a big proponent of checklists,” Escobar says. “At the start of every project, I ask questions: Who are the approvers? Where are we shooting? What are the studio’s wrap requirements? What does the tax incentive require? The more I know early on, the fewer surprises later.”

Her preparation-first approach ensures every step of the process, from payroll runs to audit closeouts, is smoother and faster.

From Reactive to Ready: Redefining Audit Prep

When data lives in multiple systems, audit prep becomes a chase. But when records, vouchers, and approvals are all connected, audits turn into a confirmation step rather than a reconstruction effort.

Being audit-ready means organized systems, accurate data, and secure records that can be accessed with confidence. It’s not about overhauling how productions work; it’s about tightening the process, protecting sensitive information, and maintaining consistency from day one.

Reach out and let us show you how Everyset can help your team become more audit-ready.